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Kassenboehmer, Sonja C.
Schatz, Sonja G.
Year of Publication: 
Series/Report no.: 
SOEPPapers on Multidisciplinary Panel Data Research 697
Using a nationally representative panel dataset, this study investigates the extent and impact of systematic misconceptions of the currently unemployed concerning their statistical re-employment probability, affecting their labor market behavior in a sub-optimal way. Specifically, people with unemployment experience of 3 to 5 years significantly underestimate their objective re-employment probabilities as determined by the econometrician's all-seeing "Eye of Providence". Simply having information concerning the individuals' previous unemployment experience is sufficient to make more accurate predictions than the individuals themselves. People who underestimate their re-employment probability are less likely to search actively for a job and indeed more likely to exit the labor force. If re-employed, they are more likely to accept lower wages, work fewer hours, work part-time and experience lower levels of job satisfaction. This information can be used by employment agency case workers to counsel clients better and prevent client adverse behavior and outcomes.
Job Insecurity
Re-employment Expectations
Prediction Errors
Document Type: 
Working Paper

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